Rebase Definition
Rebase, in the world of cryptocurrency and blockchain, refers to a novel approach of implementing a periodic adjustment to a cryptocurrency’s price peg. It involves adjusting the supply of tokens with the aim of moving the token’s price towards a target price.
Rebase Key Points
- Rebase is a process where the supply of a token is adjusted periodically based on its price movements.
- It is often used in stablecoins to maintain the token’s value in line with a pegged asset.
- The process relies on a sophisticated algorithm that automatically determines when and how the supply needs to be rebased.
Who uses Rebase?
Rebase is predominantly used by creators and users of specific cryptocurrencies that aim to stabilize their token value. The strategy is typically seen in certain types of stablecoins and elastic supply coins.
What is Rebase used for?
Rebase is used to ensure the stable value of a digital asset, often pegged to another asset. It achieves this through a dynamic adjustment of the cryptocurrency’s supply, either expanding or contracting depending on the market conditions.
When is Rebase used?
Rebase is used when the price of the coin diverges significantly from its target price. Depending on the token’s protocol, the rebase mechanism can be implemented at set intervals like daily or even multiple times a day.
Where is Rebase used?
Rebase is used in the blockchain and cryptocurrency ecosystems, specifically with tokens that aim to maintain a specific price peg. Notable examples include Ampleforth, Basecoin, and DigixDAO.
Why is Rebase important?
Rebase strategy plays a vital role in stabilizing the value of cryptocurrencies. By effectively managing the token supply, it promotes price stability, enhances trust in the digital asset, and can foster greater usage in practical applications, such as cryptocurrency payments or transferring value across borders.
How does Rebase work?
The rebase mechanism works via a sophisticated algorithm that tracks the token’s market price and compares it to its target price. If the market price deviates significantly from the target, the algorithm initiates a rebase. This process either increases or decreases the total supply of tokens, aiming to bring the market price back in line with the target price. Importantly, the rebase operation adjusts the token balance in every holder’s wallet regardless of their action, maintaining their proportional ownership in the total supply.
